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Friday, May 13, 2011

Weekly Review May 9-13

Beyond Profit interviewed seed-stage impact investor, Ben Powell of Agora Partnerships. Powell says that the most important thing to look for in a social enterprise is the impact entrepreneur. The entrepreneur, Powell says, is more important than the business model itself. It's much easier to change a business model than it is to change an entrepreneur. Also, the simplest plans can make the biggest difference in emerging markets. According to Powell, the success of a social enterprise is largely based on the entrepreneur’s values and their drive to create measurable and purposeful social impact.

Social entrepreneurs are the key to real social impact, but there are many additional challenges beyond simply creating an effective business model. Here at ID, we seek to invest in seed stage social enterprises, but what challenges do those social entrepreneurs face? Three successful social entrepreneurs share their insights with Beyond Profit and the three most common problems for new social enterprises. The first major problem is the funding gap: connecting impact investors and social entrepreneurs. Emerging markets are riskier and angel investors or venture capitalists are harder to find. Fortunately, there is a growing number of impact investors (like us, Gray Ghost Ventures, Agora Partnerships, etc) and more ways to connect them (like Sankalp Forum, SOCAP). The next challenge for startup social enterprises is organizational structure, including talent acquisition. Third, a social entrepreneur needs to understand the needs of the BoP and how to meet them. Finally, regulatory issues are a major challenge, especially for the mobile money industry. Some governments embrace innovation, while others make it much more difficult for entrepreneurs to operate. It’s important to know that it is possible to overcome these challenges; the proof is in our portfolio. Read the whole article for examples and experiences from Movirtu, Finestrella, and Juhudi Kilimo.

Antony Bugg-Levine, Rockefeller Foundation Managing Director and Institutional Investor discuss the trends in impact investing -- big banks are catching on. JPMorgan Chase & Co. predicts that between $400 billion and $1 trillion will be invested in the social enterprise sector over the next ten years. The article cites that charitable giving was down by 35% last year. Impact investing produces social benefits and a financial return. As we know, the term “impact” investing is a little vague (for our definition, see this post). The article goes on to discuss the initiatives to invest in impact from big companies like Prudential and TIAA-CREF. However, “institutional investors tend to most concerned about returns,” rather than the social good. It’s the age old bottom line dilemma. Lots of different impact measurement tools are appearing, like the Global Impact Investing Rating System. However, the world’s poor have so many different needs, and there are so many ways to address them (from alternative energy to mobile technology and everything in between), to make comparisons in returns is difficult. Overall, it’s still “unclear how impact investors can ensure that their appetite for return doesn’t overtake their desire to improve the world.” On the other hand, there are comparatively smaller impact investors (like us) that exist solely to invest in impact with truly patient capital. Big banks have the financial power, but do they have the social willpower?

We’ve frequently mentioned that one of the biggest challenges in the industry is connecting impact investors and social entrepreneurs. Intellecap is a social sector advisory firm in India launching “Intellecap, Impact Investor Network,” or I-cube N. It’s a new network seeking to partner with impact investors to facilitate 5-6 investments per year in the areas of “agriculture, clean energy, education, healthcare, [and] financial inclusion (without microfinance). I-cube N seeks to mobilize money and create an “ecosystem” to unite impact investors and social entrepreneurs.

Don’t forget, we’re currently seeking innovators for BETA, the Boston Emerging Technology Accelerator. If you have a technological idea, or know someone who does, please check out http://bit.ly/IDBETA. We want to help you bring your technology from innovation to enterprise and prove you with the support you need along the way. Together, we can create a new technology to help the underserved in emerging markets.